Do Professional Athletes Need To Be Represented By Sports Agents?

Are sports agents necessary? Professional athletes have recently focused on the importance (or lack thereof) of sport agent representation in contract negotiations.

In May, National Football League first-round draft pick Ereck Flowers represented himself without an agent in contract negotiations with the New York Giants. An article written on Derek Jeter’s “Player’s Tribune” has ignited further debate on the issue within the sports community. Russell Okung, the article’s author and Seahawks Offensive Tackle, wrote the piece to announce that he will be represented pro se upon his becoming a free agent in 2016. Okung argues that athletes are equipped to negotiate all of their contracts without an agent and believes that he “knows his own worth” better than any agent. This, however, is mistaken.

The Pro Bowler compared the average agent to a poor reproduction of Tom Cruise in Jerry Maguire. Specifically, Mr. Okung discusses the discrepancy between the attention agents give their clients versus the attention that client deserves. As our Sports Agent Rankings show, the majority of successful agents represent well over 50 clients at a time. Okung is correct: an unfocused agent is a useless agent. There are very few agents who are equipped to handle the daily needs of all of their clients, while personally negotiating each of their player contracts. The Jerry Maguire model of representing an entire team worth of clients in a multitude of different ways is obsolete.

The existence of agents is still necessary—the modern athlete has more opportunity than the past but face more complex types of risk. In contravention to Russell Okung’s beliefs, the representation of a client requires so much more than just knowledge of market value and player worth.

Agents speak the language of the leagues collective bargaining agreement (CBA), endorsement, and marketing contracts in the same vein as a player’s understanding of the playbook. They are under the impression team contracts, endorsement deals, and other business agreements are believed to be entirely “Standard Form Contracts.” This means that the terms are pre-written and require only the player’s salary and length of contract. However, this could not be any further from the truth. Legally executed contracts do not have to reflect any of the terms discussed at the negotiating table.

Mr. Okung argues that players should hire contract attorneys if they do not feel comfortable negotiating various types of agreements alone. All of these agreements, however, require industry-intensive knowledge acquired over years of both sports specific and contract negotiation experience. Further, the player’s agent, who understands the athletes expenses, spending habits, and potential expenses (children, marriage, returning to school, etc.) can tailor a contract to his client’s needs.

Sports agent Scott Boras (right) has negotiated more than $2.3 billion in current MLB player contracts, clearly showing the value that competent representation can bring professional athletes.

These negotiations are complex. The highest percentage of an athlete’s lifetime income comes from their earnings on the field or court; thus, their contract negotiations are a game of extraordinarily high-stakes. Professional sports teams negotiate formulaically, they consider: the player’s age, injury history, personal history, statistical trends, and position-specific wear-and-tear. Agents argue by comparing similarly-traited players with high salaries. The contracts of different positions are drastically different; each position’s salary demands a high degree of industry specific knowledge and the arguments to be used against assertions made by the team’s negotiators. Agents are experienced in these types of negotiations: the everyday business attorney is not.

Some contracts require restructuring or are complicated because of the player’s history. After missing nearly an entire season due to suspension, Minnesota Vikings All-Pro Running Back Adrian Peterson recently agreed to restructure his contract. Both sides respect that Running Backs do not generally age well, and thus are uncommonly given lucrative contracts after age 30. Peterson’s agent, Ben Dogra of Relativity Sports, appreciated the market for his client and limited bargaining power post-suspension. In the restructured contract, Peterson and the Vikings agreed to reduce his yearly salary by nearly $2 million in exchange for an extension in the duration of the contract.

The contracts lesser in value, such as endorsements or public appearances, are much higher in frequency. Most of the contract structures in endorsements are specific to what the endorsing company needs to advance its product. For higher profile athletes, they represent more choice. However, for most athletes, an agent is necessary to “push” their clients brand to local businesses and organizations.

Agents need to choose the best possible endorsement for their client; sometimes this yields smaller immediate returns. For example, it's estimated that Peyton Manning earned over $12.5 million last year from endorsements and as compared to about $7 million by Tom Brady. The discrepancy in earnings and the brands attached to each player point out an interesting decision to be made by the agent: which endorsements best suit your client? The brands that Tom Brady represents, such as Movado and Smartwater, have a higher earning potential. This is because Brady and agent have chosen to pursue luxury brands that will continue to use Tom Brady as a spokesperson post-retirement. Peyton Manning’s choices in brand representation parallel the common fan, such as Gatorade, DirecTV and Papa John’s Pizza. However, it would be difficult to assume
Gatorade would want to use a 45 year old Peyton Manning as its leading brand person.

Finally, Okung argues that an agent’s standard 3% commission on NFL contracts is exorbitantly high and undeserved. Monetarily, the agent’s commission often justifies the result. For example, a player with an agent may reasonably be able to negotiate an extra $1 million on a $20 million contract because of a preexisting relationship with team management. Ultimately, a one million dollar increase in salary for the player only results in a $30,000 commission cost. Proportionally speaking, the agent’s commission mathematically cannot outweigh the benefit of any money added onto the contract value.

Professional athletes like Russell Okung should understand: not all agents are the right agent to fit their needs. There must have been a reason all but one of Jerry Maguire’s clients fired him. Regardless, hiring an agent for representation is a vital failsafe for any professional athlete, especially NFL players.